Bitcoins are all the rage right now and are changing the way people think about money. But can you pay your mortgage using this new digital currency? Find out below!
If you are looking to buy a house, there are a number of financial assets that could help you qualify for a mortgage including your current home, cash in savings and checking, retirement accounts and other investments. But what if you have assets that include bitcoins? While the cryptocurrency was recently labelled as an asset by the Internal Revenue Service, most lenders remain wary about how to value and accept this new digital currency.
Bitcoins as Assets
Bitcoin has been around for about eight years. It could be used in the mortgage transaction just like any other form of money. But there are a few problems. What is one Bitcoin worth? Will anybody accept them?
Let’s start with the worth of a Bitcoin. We would treat it like any other foreign currency. It would need to be converted in terms of value if not in terms of actual conversion to United States dollars. The good news is that there are exchanges for them. One Bitcoin was worth $16,490 on December 14, 2017 3:29pm PST.
Until more consistent rules are put into place, here are some ways you may be able to use Bitcoin during the mortgage process.
To pay closing costs and fees: A Manhattan mortgage provider made history in late 2013 when it became the first firm to accept bitcoins for real estate closing costs and fees. While this is an exciting milestone for the cryptocurrency, the trend has yet to catch on with most lenders. And do not expect to be able to make your mortgage payment in bitcoins because most experts think that is a long way off.
Use bitcoins as an asset on your mortgage application: Valuing bitcoin on a mortgage application is new territory for most mortgage lenders, so you might struggle to find one who will take this asset into consideration. But there is anecdotal evidence that a handful of mortgage providers are becoming more bitcoin-friendly. Just like all assets used to qualify for a mortgage, you will need to verify the value of the bitcoins you hold and submit proper and often extensive documentation to your mortgage provider.
Use bitcoins for proper documentation of transactions in a bank account: Even if you don’t plan on using your bitcoins to boost your assets when you apply for a mortgage, your mortgage provider may still request documentation for any large transactions in and out of your bank account. Your mortgage provider would want to confirm how that money entered your bank account if you cashed out a large amount of bitcoins to use for a down payment. This is similar to accounting for large cash gifts. Mortgage providers need to be sure you have not borrowed money from somewhere else to boost your liquid assets. For this reason, you should be prepared with a record of your bitcoin-to-bank-account transaction history.
Are you in the market to purchase a home in Rancho Santa Margarita, Coto de Caza, or Mission Viejo? Click here to talk to the Ryan Grant Team today!